Study: Financial Tax Would Pay Off Big

Wednesday, March 11, 2015

Elected leaders in Washington are heading into another season of wrangling over the same old federal budget revenue shortfalls. But a number of European countries are looking forward to a revenue injection from a fresh and deserving source: high flyers in the financial markets.

Eleven EU governments are now working out the final details of a plan for a regional financial transactions tax, with a January 2016 deadline for implementation.

Applying a small tax to each trade of stocks and derivatives would discourage short-term, purely speculative trading while generating significant revenue. And according to a just-released study, those revenues are likely to run even higher than originally projected.

The German Social Democratic Party commissioned the study from the prestigious German Institute for Economic Research, more commonly known by its acronym, DIW. The results are eye-popping.

Germany alone can expect anywhere from 18 to nearly 45 billion euros per year from a serious regional financial transactions tax, depending on how the tax affects trading levels, according to DIW. That translates into a potential benefit of about $US48 billion in an economy one-fifth the size of the United States.

The Joint Committee on Taxation of the U.S. Congress has produced a revenue score for only one of several financial transactions tax bills pending before Congress, coming up with a far lower number: $350 billion over 10 years.